SAP Solution in Detail Analytics Solutions from SAP SAP Sales Insights for Retail Enabling Competitive Advantage in Retail with Sales Insights
Table of Contents 3 Quick Facts 4 Making Data-Driven Decisions Based on a Retail Analytics Methodology 9 Helping Your Organization Gain the Most from Sales Insights 2 / 9
Quick Facts Summary The SAP Sales Insights for Retail analytic application empowers business executives, category managers, promotion planners, and other retail decision makers to gain deep insight into pointof-sale (POS) data. It is a highly flexible analytic application that runs on the SAP HANA platform, includes a retail analytics methodology, and is embedded in a broader offering of consulting services for technical implementation, user training, and change management. Objectives Improve product promotions in terms of what, when, and how often Determine what products should be part of a product assortment Identify root causes for profit changes in certain stores or product categories Solution Retail analytics methodology with a step-by-step approach to analysis and action Analytic application with flexible tools for product affinity, value driver, and key item list analysis Rapid analytic processing on POS data using the in-memory functionality of SAP HANA Embedded with consulting services delivered by industry experts to define and execute a retail analytics strategy Benefits Empower business users with insights about retail sales using a proven methodology and easy-to-use analytic tools Enable flexibility and speed using SAP HANA to analyze billions of transactions in seconds Deploy quickly, giving business users the advantage of sales insights in their daily jobs for improved decision making Learn more Contact your SAP representative, or visit us at www.sap.com/appliedanalytics. Identify root causes for performance problems in stores or categories quickly so that you can react in a more targeted way. 3 / 9
Making Data-Driven Decisions Based on a Retail Analytics Methodology The SAP Sales Insights for Retail analytic application helps you gain deep insight into retail sales from point-of-sale data. It is a highly flexible analytic application that runs on the SAP HANA platform, includes a retail analytics methodology, and is embedded in a broader offering of consulting services for technical implementation, user training, and change management. DIFFERENTIATE YOUR BUSINESS WITH POINT-OF-SALE DATA ANALYSIS The retail industry is undergoing dramatic changes. Competition from online stores puts enormous pressure on prices, and promotional campaigns increase customers expectations for multiple channel fulfillment. With the proliferation of mobile devices, consumers have instant access to information and buying power. To succeed in such a challenging retail environment, you need to differentiate your business by anticipating the needs of your customers and tailoring services and prices as specifically as possible to the consumer s individual taste. Retailers generate millions of transaction records daily. The wealth of data increases exponentially as loyalty programs and online channels become more and more pervasive. Most retailers would agree that data analysis offers great potential to improve business decision making. But many struggle with questions similar to this one: We have a lot of data, but where do we begin and what exactly are we looking for? Fortunately, SAP can help you uncover the sales insights you need to compete effectively. USE A RETAIL ANALYTICS METHODOLOGY TO TRANSFORM THE BUSINESS To transform your retail business into an analyticsbased organization, SAP Sales Insights for Retail offers a retail analytics methodology. Executives, category managers, promotion planners, and other decision makers can use this methodology to make better decisions about pricing, promotions, assortment planning, store layouts, and more. As a result, your business can maximize dollars, improve margins, and increase profit. Working with SAP consultants and guided by the methodology, your organization can take a step-by-step approach toward making datadriven decisions, as follows: 1. Identify business questions you want to answer 2. Hypothesize root cause(s) that could impact results 3. Discover patterns or trends in data 4. Gain insights that lead to actionable results Using this proven analysis approach, you can gain actionable insights to respond with confidence to many common challenges in retail such as introducing new products, improving promotions, determining what products to include in an assortment, or assessing why profits are declining by product category or store. 4 / 9
Example: Assessing the Total Impact of Promotions When you place a product on sale, your goal may be to attract new customers to your store, encourage people to try a new product, or increase drag-along sales of other products. But a sale can also promote hoarding behavior encouraging existing customers to stock up now and delaying repeat purchases by several weeks. The result is that you sell a lot now but less in the future, which can negatively impact your overall profit. Similarly, most promotions lead to some cannibalization of similar products that are not on sale at that point in time. So how do you know whether the promotion is having a positive sales impact over all? Fortunately, SAP Sales Insights for Retail can help you understand the actual impact of promotions in the here and now before the promotion has run its course enabling you to make adjustments as needed. Using a step-by-step analytical approach, you can assess the situation as follows: 1. Pose a business question: What was the total profit impact of promotions in the past, and what can we learn from that for our future promotions? 2. Develop a root cause hypothesis: Promotions cause different types of reactions, such as attracting new customers to the store, promoting a new product, dragging along other products in the sale, hoarding behavior, or cannibalizing of similar products. 3. Derive the corresponding patterns in the data: Process records of all customers purchasing the sale product. Look for patterns that show sales to net-new customers compared to existing customers, and assess whether hoarding behavior is occurring (for example, an increase in the number of units sold to one individual customer may indicate hoarding). 4. Use SAP Sales Insights for Retail to gain insight on whether the promotion is meeting your goals: For example, analyze the number of units sold per customer before and during the promotion to identify hoarding behavior. Track product affinities during the promotion to see if your expected drag-along sales materialize, and monitor the sales numbers of similar products to be aware of cannibalization effects. 5. Achieve actionable results: Create an estimate of the promotion s total profit impact, including all kinds of different effects. Based on this, decide whether the promotion will be repeated in the future, and identify adjustments on a range of factors (such as price, rebate policy, promotion rules, or in-store locations) to meet your objectives. Use analytics to make better decisions about pricing, promotions, assortments, and more to maximize dollars, improve margins, and increase profit. 5 / 9
GAIN SALES INSIGHTS USING THREE KEY ANALYSIS TOOLS The SAP Sales Insights for Retail analytic application runs natively on the SAP HANA platform, enabling you to analyze point-of-sale data in-memory to gain rapid insight. Alternatively, the application can be deployed with the SAP Customer Activity Repository application powered by SAP HANA. The analytic application includes three analysis tools that enable you to flexibly establish key performance indicators (KPIs) and monitor the success of sales by product, product category, and store. As described below, SAP Sales Insights for Retail helps you customize your sales analysis with the following flexible analytic tools. Product Affinity Analysis Tool This tool computes product affinities and market basket compositions, so you can better identify drag-along items for promotional sales or improve product placement within stores. For example, the tool can help you answer questions such as: How many transactions contain both product A and something from category B? Which SKU is sold most often with something from department C? If a customer purchases something from category D, what is the chance that they will also buy something from category E? See Figure 1 for an example of a product affinity analysis. Figure 1: Computing Product Affinities 6 / 9
Value-Driver Tree Analysis Tool This tool computes how changes in KPIs over time impact each other. Examples of KPIs and value drivers include profit, revenue, growth margin, number of transactions, average basket size, items per basket, average price per item, promotion share, and shopping frequency. By monitoring a value-driver tree, you can quickly perform root cause analysis whenever you observe unexpected profit or revenue changes in a store or product category. See Figure 2 for an example of a value-driver tree. Figure 2: Identifying Change in Sales Performance with Value-Driver Tree Analysis 7 / 9
Key Items List Analysis Tool This tool enables you to compute lists and identify their most important products, categories, or stores according to relevant KPIs (such as items per basket, average basket size, average basket profit, distinct buyers, unit sales, profit, or revenue). With this tool, you better understand the impact of each SKU in your product assortment so that you can drive profit and market basket size. You can answer questions such as: Which SKU from category A is sold in the largest market baskets? Which store in region B generates the highest revenues with product C? Which categories contribute directly with high revenues but also indirectly as a part of many large market baskets? ACHIEVE TANGIBLE RESULTS AND IMPROVEMENTS SAP Sales Insights for Retail helps you achieve tangible improvements. You can: Gain a better understanding of which promotions generate positive business impact so that you can optimize promotion strategies Align the product assortment better to customers and have the right offer for each segment Analyze root cause to assess and react more quickly to performance changes in categories, departments, or stores Provide detailed sales performance analysis across multiple lines of business for actionable decision making See Figure 3. Figure 3: Monitoring Sales Performance of Key Items 8 / 9
Helping Your Organization Gain the Most from Sales Insights The SAP Sales Insights for Retail analytic application is complemented by consulting services for technical implementation, user training, and change management. Experienced consultants from SAP s Data Science organization can assist you in defining your analytics strategy and using the analytic tools. To speed implementation, they work with you to integrate data, customize the dashboards and reports, and test the solution. You can also take advantage of in-depth activities and workshops for your business users, helping them to understand how they can use analytics in their daily practice. As you transition toward a more analytical enterprise, SAP Sales Insights for Retail provides unique value to your retail organization. It enables you to: Empower your end users: Take advantage of prescriptive methodology and easy-to-use tools to give the power of analytics to everybody. Crunch Big Data rapidly for sales insight: Use analytical tools and the power of SAP HANA to analyze billions of sales transactions and customer behavior in seconds. Get up and running quickly: Use the SAP Services organization for short and nondisruptive implementation, user enablement, and customerspecific extensions to tailor the solution to meet your unique business needs. Make use of synergies with your existing investments in SAP technology. Adopt one source with SAP: Access the retail business know-how, the analytical tools, and the high-performance computing platform of SAP HANA together with services for implementation, user enablement, and customerspecific extensions. For More Information For more information about how your retail business can improve market basket profit, maximize marketing spend, create better promotions, and improve margins, contact your SAP representative or visit us at www.sap.com/appliedanalytics. Gain actionable insights to respond with confidence to many common challenges in retail using a proven analysis approach. 9 / 9 Studio SAP 34916enUS (14/12)
No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP SE or an SAP affiliate company. SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE (or an SAP affiliate company) in Germany and other countries. Please see http://www.sap.com/corporate-en/legal/copyright/index.epx#trademark for additional trademark information and notices. Some software products marketed by SAP SE and its distributors contain proprietary software components of other software vendors. National product specifications may vary. These materials are provided by SAP SE or an SAP affiliate company for informational purposes only, without representation or warranty of any kind, and SAP SE or its affiliated companies shall not be liable for errors or omissions with respect to the materials. The only warranties for SAP SE or SAP affiliate company products and services are those that are set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty. In particular, SAP SE or its affiliated companies have no obligation to pursue any course of business outlined in this document or any related presentation, or to develop or release any functionality mentioned therein. This document, or any related presentation, and SAP SE s or its affiliated companies strategy and possible future developments, products, and/or platform directions and functionality are all subject to change and may be changed by SAP SE or its affiliated companies at any time for any reason without notice. The information in this document is not a commitment, promise, or legal obligation to deliver any material, code, or functionality. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates, and they should not be relied upon in making purchasing decisions.